iPhone 4: The Consumer Reports fiasco

The staff loved the phone. They hated the phone. They gave it their highest rating

It’s been a wild ride for Apple (AAPL) and Consumer Reports, and nobody came out of it looking good.

It started Monday morning, when the magazine’s staff — catching up to a two-week old story — announced on its website that it couldn’t recommend the iPhone 4 unless Apple did something about the phone’s reception issues.

The report, published on consumerreports.org with an accompanying video, set off a feeding frenzy in the tech press, always happy to knock Apple down a peg. “Consumer Reports flunks iPhone 4,” was the headline on the U.K.’s V3. “Time for an iPhone Recall?” asked CNET.

But as some reporters remembered, CR‘s staff had been impressed with the phone — and dismissed the antenna issues — 10 days earlier. And as All Things D reported Monday afternoon, the same phone just got the equivalent of a Consumer Reports rave in its formal evaluation — 76 on a scale of 100, two points higher than the next runners up, the iPhone 3GS and the HTC Evo 4G. (Report here, subscription required.)

Wall Street, meanwhile, reacting to the flood of negative headlines, knocked $6.99 off Apple’s share price (and $6.36 billion off its market cap) in the space of two hours. The stock dropped $10 in early trading Tuesday.

Apple handled the evolving PR disaster with its usual thin skin. Although it had touted CR‘s original report — the one that couldn’t reproduce the antenna problem — on its Hot News list, the company couldn’t countenance talk about the second one (the “can’t recommend” report) on its official discussion threads, and as TUAW reports, it began systematically deleting the topic from its user forums as fast as they sprang up.

By the next day, the whole thing had gone viral. The story had jumped beyond Techmeme (where it still topped the news list, with 68 headlines) to the mainstream media. A Google News search of “Consumer Reports” and “iPhone” Tuesday morning turned up 1,449 stories.

In June, Steve Jobs told one of the first customers to complain about the iPhone 4’s antenna that he was holding the phone the wrong way, a comment Jobs probably regretted as soon as he hit SEND. Apple is probably having second thoughts about the July 2 “letter to iPhone users” that attributed the drop in bars to a software glitch — an explanation Consumer Reports‘ testing called into question.

Given that the problem disappears the minute you install Apple’s $29 Bumper, the company may come to regret that it didn’t immediately offer them for free to any iPhone 4 owner who asked for one.